Sale of Dampier-to-Bunbury natural gas pipeline announced

3/3/98

Premier Richard Court today announced the completion of the largest and most successful privatisation in the State's history - the sale of the Dampier-to-Bunbury Natural Gas Pipeline (DBNGP).

The Premier confirmed that the 1530km pipeline would be sold to Epic Energy Australia for $2,407 million, including $104 million in State Government stamp duty. Epic Energy Australia is an Australian-based company, owned by four Australian-based shareholders (AMP Life Ltd, Axiom and Hastings (for the Utilities Trust of Australia and the Australian Infrastructure Fund) and two US-based shareholders (El Paso Natural Gas Company and Consolidated Natural Gas Company).

"The Coalition Government has always strongly believed that the Dampier to Bunbury pipeline would be an eagerly sought energy asset by companies around the world," Mr Court said.

"The Government is very pleased to have realised such a significant price for the pipeline and that Epic Energy Australia is owned one third by Australian shareholders. The sale of this energy asset, which Western Australian taxpayers have owned since it was built in 1984, has been extremely successful and is a credit to everyone who has worked throughout the complex process to its completion.

"The proceeds of the sale will be used to repay debt associated with the DBNGP and all costs of the sale process. The Government will consider the disbursement of the remaining surplus over the next few weeks."

Western Australian Energy Minister Colin Barnett announced the 100 per cent privatisation of the DBNGP in May last year. A Gas Pipeline Sale Steering Committee (GPSSC) was established to facilitate the sale process and recommend to the Government a preferred bidder, The committee has been headed since last November by Department of Resources Development CEO Dr Des Kelly.

Mr Barnett said in determining the final bids, the State expected prospective bidders to focus on the following key aspects which placed the DBNGP in a favourable position as a strategic asset servicing the requirements of gas users in the State:

·      the current environment of strong growth in demand in the WA market and the potential for continuing growth in this area;

·      ability to enhance capacity through access to the existing easement and to the additional easement, when obtained;

·      anticipated decline in incremental enhancement costs;

·      long term customer contracts;

·      experienced pipeline workforce;

·      well maintained pipeline;

·      access to significant reserves of natural gas; and -

·      the policy of deregulation and major reform in the energy sector of WA.

At the close of the bidding process last Saturday, bids were received from three shortlisted bidders - Australian Gas Light Company/CMS Energy Corporation; Epic Energy Australia; and Nova Gas/UniSuper/Bankers Trust. This morning, State Cabinet approved the sale to Epic Energy Australia.

Epic Energy Australia has extensive pipeline operating expertise in Australia through its ownership of a total of around 2,080km of pipeline, including its recently-announced acquisition of the Pilbara Energy Pipeline and the Burrup Extension Pipeline construction, the Moomba to Adelaide pipeline system and the South West Queensland Pipeline. It also operates pipeline on behalf of other owners.

Epic Energy Australia's US partners own more than 70,000km of pipeline systems and operate large onshore and offshore gathering systems, gas production wells, offshore platforms and gas processing plants.

"For the past several months, the Gas Pipeline Sale Steering Committee has met with the three bidders on a regular basis and discussions have been held on a wide range of issues in order to ensure that the bidders all understood the conditions governing the sale," Mr Barnett said.

"The GPSSC and the working group analysed, assessed and carefully examined the bids with a view to determining the bid that provided the greatest advantage to the State.

"This analysis established that Epic Energy Australia's complying bid was superior to any other bid. Significantly for WA gas consumers, the new owner has committed to lower gas tariffs, a condition of sale set down by the State Government.

"Under the transitional access regime, tariffs will fall 20 per cent from $1.19 (nominal) in 1998 to $1 (nominal) in 2000. From the year 2000, the National Access Code will be adopted in WA.

"Epic Energy Australia is prepared to spend $874 million through to 2007 to double the capacity of the pipeline and has guaranteed priority rights, as set down by the State Government, for AlintaGas and Western Power on capacity to serve residential and small business customers."

Mr Barnett said a number of AlintaGas employees were involved in the operation and maintenance of the DBNGP and that the sale conditions also included that the new owner would employ these employees.

"Completion of the sale process is expected to occur in April," the Minister said.

"At that time, the 133 AlintaGas employees who have previously agreed to accept employment with the successful bidder for the DBNGP will formerly transfer to Epic Energy Australia with guaranteed employment for two years.

"The Government has already ensured that these people will not lose part of their State Government superannuation entitlements when they transfer to Epic Energy Australia.

"This was a concern to them some months ago, but the Government believes it is only fair and proper to reimburse the 1.75 per cent discount applied by the Government Employees Superannuation Board for those employees who will withdraw their benefits when they begin work with Epic Energy Australia.

"As well, Epic Energy Australia has also committed that with the success of its bid, it would establish Perth headquarters for its Australian operations."

Mr Barnett said he was delighted that such a complex sale had been handled professionally and with the utmost of confidentiality and accountability by the GPSSC, advised by Graham Baker, head of the GPSSC working group, JP Morgan and Hartley Poynton.

He also thanked all of the Australian and international companies and investors who had initially registered their interest in the pipeline and the employees of AlintaGas who were professional and supportive.

"Today's announcement is the realisation of the State Government's 1993 election commitment and is a very significant highlight in the energy reform process in Western Australia," Mr Barnett said.

"I am delighted that the Government has been able to drive this sale process to be the largest ever privatisation in the history of the State. We look forward to the arrival of the strong presence by Epic Energy Australia in Western Australia and wish them every success as the new owners of the State's most strategic energy asset."

Media contact: Bronwyn Hillman (08) 9222 9475